UAE to see 2.1pc GDP growth in 2018: Moody’s

LONDON, May 22, 2018

UAE is expected to record a GDP growth of 2.1 per cent in 2018 and 3.9 per cent in 2019, said Moody’s in a new report, adding that non-oil growth will recover in 2018-2021, supported by government spending after three years of cuts.

The United Arab Emirates' (Aa2 stable) credit profile reflects its financial support from Abu Dhabi, large hydrocarbon reserves and very high wealth levels, the report added.

"The UAE's superior infrastructure, very high per capita income and vast hydrocarbon reserves support its creditworthiness," said Thaddeus Best, a Moody's analyst and co-author of the report.

"These strengths are balanced against challenges which include limited institutional transparency and the absence of public data around offshore assets and some of the emirates' public finances."

Key takeaways:

• The UAE's very high fiscal strength reflects the country's record of large fiscal surpluses and build-up of very large financial assets in Abu Dhabi's sovereign wealth fund (ADIA).

• As a result of Abu Dhabi's fiscal consolidation and the recovery in oil prices, Moody's expects the UAE's consolidated government deficit to decrease to 0.8 per cent of GDP in 2018, from an expected 2.3 per cent in 2017.

• The UAE's consolidated fiscal position shows a diverging path between Abu Dhabi, where broad spending cuts were enacted, and Dubai, which has continued to increase spending ahead of the World Expo 2020.

• On a consolidated government basis, the UAE’s general government debt, at an estimated $85 billion at the end of 2017, was equivalent to 22 per cent of GDP.

• The majority of the UAE's government debt load is concentrated in Dubai, which as of year-end 2017, stood at estimated $60.8 billion.

• Moody’s estimates Abu Dhabi's debt increased by more than 100 per cent following last year's $10 billion issuance.

• Among the northern emirates, Moody’s estimates Sharjah’s direct government debt reached $4.9 billion in first quarter 2018, consisting of market borrowings in the form of three sukuks of $500 million, $750 million and most recently a $1 billion issuance in March 2018.

• Moody’s expects the real estate market to remain subdued as residential rents and sale prices will continue to decline in 2018, due to excess supply and subdued growth. – TradeArabia News Service